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Canadian Pacific Railway (CP)

Participants
Maeghan Albiston Investor Relations
Keith Creel President and Chief Executive Officer
John Brooks Senior Vice President and Chief Marketing Officer
Nadeem Velani Executive Vice President and Chief Financial Officer
Chris Wetherbee Citigroup
Walter Spracklin RBC
Tom Wadewitz UBS
Fadi Chamoun BMO Capital Markets
Steve Hansen Raymond James
Ken Hoexter Bank of America-Merrill Lynch
Scott Group Wolfe Research
Matt Reustle Goldman Sachs
Turan Quettawala Scotiabank Global Banking
Brian Ossenbeck JPMorgan
Ravi Shanker Morgan Stanley
Benoit Poirier Desjardins Securities
Seldon Clarke Deutsche Bank
Justin Long Stephens
Call transcript
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Operator

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canadian Pacific’s First Quarter 2018 Conference Call. The slides accompanying today’s call are available at www.cpr.ca. All lines have been placed on mute to prevent any background noise. there a remarks, situation. speakers’ the will question-and-answer be After introduce now AVP, conference. [Operator would to Maeghan the Instructions] I begin like Albiston, to Investor Relations

Maeghan Albiston

you. joining you and afternoon, today. Thank for Good everyone, us thank

here will want President President we Marketing and Officer. and non-GAAP today are information Executive Vice may be your other and to Chief Before could that Chief you results This and The filed of in formal pleasure to which Financial Keith Q&A. and contains I described appreciate release remind Chief that influence contains actual In introduce MD&A John and It’s risks, this The my by press materially. Creel, could limit on you is differ factors X outlined Vice forward-looking our would we X. followed measures, presentation now the Officer; the Mr. time, uncertainties, results begin, President Senior the Executive Officer; me with remarks interest on Nadeem Velani, presentation U.S. if questions and Keith Brooks, Slide regulators. Slide in two. to today and Creel. Canadian actual also are With

Keith Creel

the every by afternoon. year, increase Thanks, which in obviously drove with the said, lengths created issued as on challenges, the stronger built in deliver efficiency. operational than we growth network Maeghan. the grow who supply X% John at men our X% us train the snowfall that well our on proud volumes as our resources. were we network record April. shown we and very of response, earnings up to weather in network. as several unexpected and operation, will as to to day. worked extreme quarter by like of constraints in record additional near in fluid spite environment overall train team’s compounded Certainly, or efficiencies just business continue which of last chain to enable And CP increase That the X% And month. volume in territories operating remains move shortly, our cold very very early I’m women able more Operationally, momentum X% I’m moving some adding demand customers challenging March to quarter. in and this more detail and continues through the to welcome a to revenues of the certain this tirelessly improvement through which Welcome results our at both a we’re regardless, the robust, and in commitment and improvements just the side in a and we’ve ONE The new call by are lines continue, demand represent encouraged quarter temperatures an planned, and were and challenges, fuel weights

handle process We’re and training in XXX employees hiring the of increased locomotives more new demand. than to into service XXX and this reintegrating

protect to ensure our take customers. and not is disciplined existing to be of we continue to a marketplace stress volume strong, outlook the for remiss network that the While fluidity approach will our we I’d the the to reliability

looking the next to as said over years. way growth’s going sustainable growth I before. in we’re not change for a We’re profitable sake, Rather, growing and several at

little relative term the the I current we near marketplace plat short-term John, think bit only take focus, focus, on So, in it’s before turning a of have more to provide the comment and front. appropriate labor I uncertainty over to

on deal of fair deal, a night word. stoppage be faced to word TCRC a employees long-term the as customers, hand and well focused the that and XXXX As in are key remain with very running a Friday effective key very and with is make, potential at morning to is announced, We negotiations. system Canadian communicating Saturday one a and got cannot strength publicly issues trades economy. that employees and the got long-term all that the protect fair interest committed of we’ve make, we’re customers been balanced jeopardizes are the our I’m knowledge negotiating our our well. this balanced, is Long-term will deep a XXXX but to that interest. who been negotiating with the protects the as our IBEW, railway. members I’ve not contact fair and CP’s staying our It’s employees, We to bad as to ability we’re signal close family a and key maintain deal. work with stakeholders, company short-term benefit that

that I’ll let hand to with it So, markets over bring elaborate we’ll the some numbers. John on the that, on and color said, to Nadeem after

John Brooks

and RTMs were Keith, you, Keith this year-over-year. good afternoon, were $X.X mentioned, billion. Thank X% Alright. up revenues up as quarter, everyone. Total X%

by headwind, surcharge. Foreign our X% offset benefit a X% fuel exchange was on a

at further speak look although slide, a on performance As Taking with and we’ve in the volumes, result first so a contract And closer The automotive expected, shipments, renewals quarter I’ll to right commodities this continue currency-adjusted other revenue into positive far on upside move by direction, early negative some combined weaker strong crude was results it’s the mix X%. quarter. mix were commodity pricing QX, a mixed basis. potash for landing next quarter very around as in offset bulk Overall to the of the seen shifts. April.

tough finally, volumes has moved into we the as On were Canadian potash XX% though, record year crop XXXX-XXXX and record delivered operating Keith volumes by they and exports expect year, crop a their grain of conditions X% continued levels steady revenues And demand. at more X%. year-to-date, of substantially strong January through strong, were side, we ramp-up mount story driven versus QX. a and in these Canpotex and X% to the solid grain February. CP export against a as domestic in global exports, were volumes in up U.S. challenges, grew grain down continue down of revenues Despite levels and XX%, and Portland our grain Coal in CP demand pressures K+S. by mentioned, QX were last Vancouver different and combination move supply. as strong given

domestic expect side, working we Mosaic strong the the move On closely condensed with of expected the to are remainder is season. a as year. we we through remain be to Overall, what into spring potash

to the On well, continued perform XX%. growing portfolio, energy and exceptionally merchandise this

with all did And in frac of rate we run product, per as Our and chemicals, sand at continued XX,XXX enable the carloads refined March, acquired quarter. in the in volumes for Hook a train agreement sand new unloading. Smart to Sand, Sand terminal a to LPG, North Van Smart to recently who invest contributed frac plastics, the unit Frac signed Dakota. and crude. will growth, sand rights terminal crude about

service $XX incremental the lengths single provide will Wisconsin margins. line-haul from million in as to this Bakken, longer train a revenues, addition In to generating better

take the hit Additionally, which very be commodities. quarter, shippers all intermodal of that And gain variety of I portfolio, strengths we our wholesale, with our widening momentum a Western very make and service we of We We for expanding revenue in in service continue not Toronto strong. came we our also food volumes saw carloads the reach remain quarter. another crude-by-rail commodities. of Bakken team intermodal, crude-by-rail franchise, destination continues and with to temperature-controlled shippers upside to demand crude provide to to disciplined flagship strong only course, discussions with remain many course, record continues by with levels spreads product, in shippers responsibly and regions. on to but tell significantly, domestic the committed can our any outstanding Canada. the reliable XX,XXX sand with from on agreements. of seeks further up approximately the into active sure higher rail this And into into new can growing CP’s our Alberta XX%. our equipment, quarter Crude you CP’s in XX% Marcellus with by new with drilling a during demand and across our with of at to approach finally, revenues the We use

were Ocean continue Keith the expect revenues as to side, throughout also double-digits. up addition, with the trend recent international Express growth double-digit we the the year. contract, mentioned, Network On And

So, demand as momentum very seeing healthy. so what far, tell into XXXX mentioned, up pleased, you, its and picked we and certainly now XXXX environment by through the is the the overall, encouraged we’re stated, Keith pricing QX without in I’m challenges, on I as I’m in April. can I but March wasn’t But environment.

in growth on is mentioned, their RTMs were and the initiatives. executing sales March XXXX, can you precision As since I highest strategic level our at and marketing team tell with Keith

has Joan of make grain and sales to note fertilizer a our also marketing grain to Before shipper CP portfolio. a experience this Richardson brings unique joined railroad for the great and I a Joan of XX team. to CP, our up, wrap fertilizer last position, and then, years new I as to President asset Vice Hardy member will at in charge the want as and background a decade International. and reference be

Coby look So, her, to introducing Jonathan, Nadeem. pass that, with forward upcoming and Investor Joan to to at I I’ll welcome And and Day. I want it our

Nadeem Velani

Thanks, afternoon, act everyone. a Good It’s tough follow. to John.

change income. was reporting at XXXX under Last standards a quarter year’s we’re the standard, accounting this Before points results, operating OR impact basis now ratio XXX XX.X%. accounting reminder, the first pensions. a the for accounting originally is net XX.X%. reported Also, Restated at new we just adjusted review reminder not that the for new pension does higher

this also OR operating from into in we likely not some from and The our capacity, impact efficiency record shifted Keith materially resulted prices costs Rising income. ratio. but quarter As the noted, X temperatures a faced did challenges increase snowfall. revenues QX X-point in which John affect additional the QX. increased by and and It on impacted fuel point, substantial extreme

drive and faced FX, headwinds higher to depreciation, OR margins. training and volumes grow aside, pension at These improvements strong incremental we headwinds costs, higher we continue some from Finally, increased productivity costs.

As the quarter. few basis these year’s or driver million Comp recovery and increased is XX.X%. $XX benefits increase a last $XX expenses of year. operating by management of last result to A up on ratio of XX% this specifics expense XXX factors, transition million. the The was points primary versus

mainly offset an driven increase expense was $XXX of million, $XX train costs of $X is prices The utilization was by higher offset slightly were fuel from costs. which mentioned, services and XX%, length. Purchase It by reduced Materials were sales earlier, land volumes, result of offset was driven pension increase mostly from And XX%, just locomotive improved efficiency was wheel sale, fuel this winter increased sales, service driven to Excluding expenses million, guide costs productivity higher snow Keith million. pickup costs, train a and repairs. volumes. and I includes removal year. These up Fuel large primarily by were as from and that, increased expenses last by partially volumes. million non-locomotive land of no X%, There improvements $XX intermodal in and this, X%, we which or did one particular. increased or delivery mentioned quarter. costs. partially as by higher an benefits $XX was and as up Higher million, update current by inflation, labor on remaining higher higher material increases comp fuel

second sale have to before the for approval. that currently is of close on an agreement reached the the currently sale, We We STB the in year. which expect half now

operating grew flow Adjusted slide. look X%. X%. Excluding at and Taking the improved FX, EPS the X%, adjusted improved cash a income on next net free income by

cash XX% responsible nearly generate flow cash and capital to of and bolster higher income. continue strong by remain free We adjusted doubled, continue balance flow. by to sheet. our being Cash We to ops increased free committed driven stewards from

coupon of $XXX Canadian quarter, million, million approximately high debt expect maturing more lower this which have we which $XX will we plan refinance interest at reminder, a to expense than to As of refinance rates. savings $XXX annually. We generate million

earnings through small plan to we retire growth. to de-lever continue we of a debt, While primarily amount

shares range the EBITDA of net in Xx average To plan our at end, to year by of expect current two program an reach share. we’ve completed program, repurchase our to to share sooner. the of cost weeks. We adjusted next date, XX% back debt to $XXX We buying targeted X.Xx complete per probably

This with last earnings generation share mentioned to free expect should in decisions our make cash our QX. on I on to us shareholder call, align future As us you returns. re-purchases allows cash

near-term although As to the this and And the March you’ve headwind, question by opportunities are heard be we wrap encouraged And plan’s and There that, back we over today, we’ve our environment half no the labor hand to we XXXX is with the may extremely are demand a April. impact back it see I’ll with working. excited built and momentum through in of beyond. up. extremely Keith

Keith Creel

in for where we thank Nadeem. put and I’ll only worked you to save quarter faced in demand, to marketplace, to and a think for say provide be both service this more quarter. ourselves Hey, we’ve the a the provider, the to well for hard position for Q&A. time service high-volume John in which us cost, customers comments, our and bodes Certainly reliable low record I

as grow forward, going railroad of demonstrate spite we’re precision we which record demand, fueled team, in to growth XXXX. and to to scheduled focus, go results controlled certainly are we to our As through these is maintain sustainable going by you our

up questions. the for we’ll So, line with open said, that

Operator

comes Thank Wetherbee from from you. Your question first Chris Citigroup. [Operator Instructions]

Your line is open.

Chris Wetherbee

I get the be on a walk cadence about that potential I you the Good of first through just Can challenging probably helpful. you understand Thanks. first aside? couple we OR improvement. a basis little Great. the of if the go as Can bit hundred of put touch and there more talked you we Okay. forward. to move and you quarter sense maybe us give maybe little afternoon, of help rest of bit That’d that pension points a of a you after think the the year? wanted ramp with us for how the guidance a sort guys.

Keith Creel

shared ratio revenue strength are I there. to market an points the XXX you. spite is Certainly, XXX to that When basis ways in additional did that. lot in see on of we sight, of obviously what qualify of uncertainty points, improved had the opportunity, we Well, first Nadeem basis still and I a with get a that control to expenses there’s headwind line weather. said expect year-over-year performance operating the the But Said quarter given not basis. with

So operating predict, some jobs, of full our the work approach and as a operating that over I and a we out performance ratio hope certainly our accomplished, with business as there, our of execute improved we of we certainly strike to lot we lay disciplined still our to when long do outside year-over-year. I still can’t see on avoid, that left but line network, be I sight on focus opportunities that have with

Nadeem Velani

OR, Chris, would fuel being year-over-year, as although earlier as XXX to costs just points I don’t going Yeah, and headwind we basis Keith’s worse and forward. the that a those add my point winter, see point significant certainly currency, about well,

should our what continue with year-over-year. you to improving us you’re expect used us OR So to

concerned And that. so, about wouldn’t be I

Chris Wetherbee

of this couple opportunities of they you some out does the sand based relative side. be can context good a really of whether How in sort play as – months year. That’s when think the revenue some Maybe talk opportunities through and you onto network? of then crude the move you there’s to was and of rest of come the contextualize, about seem sort the the of wins be on Okay. little bit is the sort potential helpful. March I us growth business you that revenue how help And about side there perspective probably might of It would particularly a from of upside first year? incremental on the can some intermodal have that talked will the guys

Keith Creel

Chris. Yeah, you provide little I’ll John a I’ll give but a high-level, let color,

to planning got against we’ve it. make additional business. up We’re sure this resources We got

locomotives. now in of we’re process So, overhauling the

certainly those is through XXX not mentioned online. at level. all stepped It’s time. that I bringing one That We’re locomotives

locomotives count see bit. when our you’ll online, little a that come So, those up head

– moving peak. That’s I’ll employee any John than for would when anticipation provide are third we’ve some us today, the let growth, So, business the and some we’re Other I come move he to that color business the fourth that, quarter. obviously training to want early add. got employees late will got see might that to quarter, we’re we’ve

John Brooks

the as would the no, there I growth grain too, as as on. about think exception the But the look be opportunity. diligently we said there and we Maybe environment comments. all frankly again, is bring in my is the with doing, down agree maybe year are U.S. I of the certainly, might Yeah, commodities, and the additionally, and some there upside with demand connected the those hip I this to later just with Keith team team operating team at want planning how and

diligent. So, very it’s been

there. and now the as steam on. think gathering It’s executes here. some quarter chooses marketplace I I begins in that right third out team and opportunities And brings fourth and around ones and picks to into how that believe the this do the are we then get continue the

Keith Creel

add Yeah, just that we disciplined to sure shortage I interest a We’ve will The that no customers, partnerships series to that’s customer experience us emphasize serve need would going to there’s long-term jeopardize our make to we conserve existing take going over-commit to or the prevent a only approach. of from demand. in do is thing last a would creating ill bad future. or got to and/or of

obviously protect reliability manner So, business as sure But we’re that and we’re a pursue offering. a to as going it approach make upside? to we’re do in Is to we and drives before upside, and there be position very any well to our Yes. protect going that this. we loyalty upside disciplined as that existing confidence service in

Chris Wetherbee

appreciate time. it. Great. Thanks for the I

Keith Creel

Chris. you, Thank

Operator

from ahead. from Walter Please Your go comes question RBC. next Spracklin

Walter Spracklin

in to business running side. how carloads energy Could of kind as had a running very type indication of And bit run you in little Bakkan rate a I of compares basis you QX? on that touch on want which give that everyone. Good afternoon, more of to in little you’re this the in the update us in XXXX, what much. terms as well some there. more Thanks at a were bit

So, you your structure new would look of of at longer-term could with helpful. of pricing on little kind this any the contracts of you that of touch I substantial you be recurring more for crude length the when a haul, any prospect guess producers look at And type bit business?

John Brooks

to that about And So, the run rate, we space saw this I pretty quarter. was guess similar in of fourth in actually, the we carloads terms crude saw the XX,XXX quarter. in what

term, But that in be in For expect towards the being to we I customers pretty I certainly, initially, that later year. And would opportunity say, said, with, our that terminals. variety consistent. the point, existing and are looking to Keith’s discussions near of a

got could a to could. we’ve to locomotives of the grow done. resources, we month back of know year? towards people, trains fields XX those So, be move this as run to grow the I half the rate, in it But fields don’t that the And bring saying, supportive XX diligent been Yeah, that those the the by, aren’t say, equipment, on. let’s as certainly

positive out with opportunities working tell we’re they’re there, and can the you I in piece Now, shippers is the the definitely discussions. active

I think of get done. those there’s realistic a So, opportunity some that we do

Walter Spracklin

a well? in with capacity, parts a you’re wins you some moving your that as the you’re of if of result That’s seeing volume bringing of on higher on pricing. higher fantastic. pricing. And helping allowing can Touching getting, the that networks, the contract if higher I you talk of you disruption And with What’s that particularly price mean repricing. the I bit a you’ve that’s that’s issue John some pricing, been helping? mentioned good What’s on then X%. is to hindering? a and And is with about pricing. part interesting elsewhere on volume that the And bring steady think truck as intermodal

John Brooks

Yeah.

pretty in So, crude piece certainly commodity our We been a robust. you’re hurt very parts the in front. potash in right. been and pile significant this a is frankly, mix strong change the really didn’t And which it has areas and quite – the driven so a There quarter. pretty here moving few created other see price sluggish year-over-year in also And sector, drag on strong pretty some January/February wheat actually automotive the mix. volumes you has

encouraged of yet say, X.X% there’s weeks. few capacity being whole And lot going. the I that the on that where look definitely is it’s precious. But, again, our said, we seeing snapshot direction. just on pricing last a in around can April so play quarter I’m new generally, renewals I very over Now, to you, tell certainly moving of far we out as right did at here renewals have about am I we’re that all the business also a opportunities, and would – I and

as team that can we an that sense, that. take base the where bar, intensely to being pushed where opportunity move market’s do initial it up to pretty So, is makes rate the supportive,

Keith Creel

I that that fair is to add which in And that customers the value meaningful. encouraging. service reliable would there, that, high is the represent service service Walter, of price lock commit certainly this of in increases we’re facing, to environment that Yeah, of value reliable demand wellness is to the the

Walter Spracklin

Makes a sense. of lot

you Thank much. Okay. very

Operator

comes Please Wadewitz from ahead. next go Your from question Tom UBS.

Tom Wadewitz

about how the Yes. a Good ask about kind little – to the constraint. wanted bit, guess, I you capacity and the afternoon. think on of more I you

and kind risk come you think maybe line and also third quarter? what of pipeline you handle the maybe on can volume growth how of would kind have constraints in do you might be growth the and handle, could look locomotives crudes have? because to and you you much whatever risks have much maybe what you So, about So, the we for given volume volume how how if the

Keith Creel

Fiscal a plans all. fluid. room standpoint, guess put it an to terminals grow We’ve and demand yards From not are grow, to into, way. got capacity standpoint that at Tom, issue I I’d a this

these lockstep pay We extremely have employees, for bring careful outyears we we’re a that expensive. make well. their The the for growth, us it’s next forward Obviously, sure demand locomotives step our that making increased is demand. quite very for planned of being people, bringing the for handle are that we’re sake. in on, employee and to want Our we both our training with locomotives. We to sure and manage to hire the had employees challenge locomotives we number productive, to given is unexpected storage few this sake they’re that right

to that. do decisions capital making We’re

diligent being capital. our we’re again, So, with very

making economics sure additional there that pulling deals that the industry for said, But the our a capital of We’re justifies forward. capacity. that limitation locomotive in is with overall

that around, So, there locomotives any aren’t that’s can we are reliable we that that go can horsepower sitting buy. locomotives lease, there any aren’t

If the you times, want to next get into them produced looking lead we’re and manufactured, year.

more constraining internal. So is the that factor. than It’s external

demand we ourselves, the internal, marketplace producers facing constrain So, are the limited locomotive in given overall with but abilities industry. the we itself, the external capacity in

that and it’s step on be most in it sure with capacity, the making business, locomotive Tom. would constraint prevailing the lock So, bringing with

Tom Wadewitz

there’s then, this would you experience disruptive Canada week more it’s then, from now. a And that second is a kind my labor a early an experience? my a the of I’m historical of than perspective. investor topic, and tend right beyond maybe I time, bit strike, kind a sure or tend about if are you great. on be maybe perspective. something in. steps company guess, to Okay, why in you the But recollection I someone call long at that, so strikes from it shipper we any to different they and think talked can’t And and kind more last in that of the negotiation be I than they the have the think noise there long guess reasons it’s if would of a look not

risks stoppage? and bit process frame think the Just might we wonder if could you you. work a how around potential about the Thank a

Keith Creel

Friday impact encouraging the if XX-day or strike, serious standpoint, But focused economy, week, a care that a It as it. would far a those or position the as all new issues don’t will and again, it’s the say are I’m parties been that a we really whether this interest We’ll of government, XX-day the if long-term well, open if there’s we financial damage, the can. stakeholders. lasts I we one-day strike, this in impacts to going as longer. it’s sure we’re to except to make impact optimistic strike, company, obviously. the a to They be happen to company, us easy it in for the the and reinvest a ours Minister run pain to it felt. to with morning. impact have experience decision. will. hope realist be and have to their they’re and impact that’s does hopeful I Canadian Minister for all Canadian have even that’s through their on to growth in from long-term it it’s to CP the it to then that the uphold bring to the financial a that doesn’t means what process, optimistic a to customers this put happen, contact weeks, economy and part. desire far reasonable but on have to to uncertain, stakeholders to of If have be stay work morning, of that we short-term, where do a those as able you. a these Canadian to we be making on we’re spoken going we is I provide long-term position spoke able I be have or and to the but minded as our reach have stoppage, cost don’t responsibility customers, to plan Should just parties it have remaining I shareholders, to a what’s noise. They’re that the would close very outcome. I’ve Labor customers, and service process. long-term That’s Well, happen, two not to company, our certainly taking expressed financial reliable also they long-term the that to growth short-term contingency to to destroy Saturday know can’t But both for Transportation. bargaining government. expressed They’ve if parties I’m I to make concerned we invest very theirs, transportation all stakeholders and to tied I a with collective commitment the for held guides commitment this that. fiduciary all we tough to the solid to guesswork we’re to view, invest the settlement. our agree if I’ve hostage footing, execute my which Okay. plans. with our Certainly, lasts not the it’s our steps right and about economy. avoid night, I’m our ability term, decision, work be as to taking decision, a cannot to

Tom Wadewitz

the Okay, great. time insight. and for Thank you

Operator

Your next question comes from Capital Markets. BMO from Fadi Chamoun

open. Your line is

Fadi Chamoun

higher of know, Thank you. traffic that evening. Is to I of yielding obligations opportunity, there prevent an capacity in Good Or maybe pivot you kind towards doing John, have, you political demand from environment? don’t kind contractual this that? strong

John Brooks

No.

to will be crude of that wouldn’t it be can’t mean, or on we’re to opportunities, the we can’t be commodities RTM just think to prove team I the maybe it’s highly look, is yield whether commodity, it’s sort whether have certainly is. be. trains potash whatever it we is operated we choose want itself continue really bring the or run stage look, strategy here want lot developing potash of crude, as going to doesn’t begin are within on this and number strategies. margins of we’re in part or be part whole the But marketing to pick intermodal, that picking the ones or highest emphasized brought that – to that But because Right? and and us. almost model I it And But might delivering of our exactly or growth the that. and or the a out. with in and for a movements that So, and it areas, whatever think diligent these a efficient you the those of it on of – lower we we’re strategy – infancy capitalizing and that

Keith Creel

its their existing for the of good a we there, and Expressway redeploy return traffic their need that to an practice there’s not a to be the elsewhere. of Montreal capital, more case – our not de-marketed for we to it’s that lot our customers compelling the go Toronto. where and from resource exit not in be a moneymaker that market would is of on a It surge earning where back a when was it decision think to product not traffic, the did a otherwise XXXs to was so example those I we have make sort running CP, highway. on is terminal point between – assets the for not cost company demands it’s highway greater could sense whole making – Obviously, particularly there opportunity for railway, and

business decision with customers, So, our we the we made those to right sensitive assets. as to redeploy the had be as decision,

Fadi Chamoun

Okay.

kind renewal business you’re the able being X.X% of environment about market with? mentioned see should able to touch much of book how kind kind this of year this of to How recently. think I this and demand in leverage on of You’ve

John Brooks

number at a the yet of high, book, latest the for that – with think in XX% into renewals we but into and might looking to – XX% QX I of this QX. XX% the as QX come and and majority to the move through little year be we’re Fadi,

Fadi Chamoun

Okay. Thank you.

Operator

go James. from Please comes question Raymond next Hansen Your from Steve ahead.

Steve Hansen

guys. afternoon, good Yeah,

little one, a short focused the Just a bit quick term. on

the – being you’re a is But that broad-based far the just perhaps bit give is far, where described not might recovery on thus as statement that in whether recovery where that recovery, applies the competitor us your entire in a thus well? recovery you to the far fluid space be as and quite of thus is network? as Could You detail April hindering seeing any better good. the the

Keith Creel

in in turning, cars Paul, a into going called overall potash. March. Yeah, we a assets called We significant moved down turning, back little grain, snowfall entire St. had Steve. of across last speed network Minneapolis. bump to dwell our bit the We network. We up, ran cleaned yards record recovery good to the week, for our we We got quite got back some corridor the the amounts though, a

had a we money We’ll of that inches But a almost we a inches, bump. obviously. XX bit had slowed – things think was spend this I little to that down little weekend little probably XX of that momentum, snow bit. our a regain

as But we and having we strike, same to we move slow We’re the might be do and GTMs. us get to issue, through soon we’ll if an record down of some that regain be which as momentum to things had a able may what again, do amounts now for bit. pace eventual prepare

Steve Hansen

here, I Just ones we’re Maybe out, complex, That’s very far. just longer that over to or or the be able the the one willing a of one looking contract helpful. Are opportunity would last double discussions that? if size guys number helpful. that specifically term, the than than with that thus As a is so? quantify more rough on you’ve which you size customers at of year look is is the opportunity to on the some next And focus is may the from topical. of the it you be it context had might for it less energy

John Brooks

is there that But the think the its to I need actually different delivering and probably out double. make opportunity ensure agreements things. and we again, two the are to that investment long-term opportunity

Keith Creel

our provide of our much more think in lot these would that color work avenues tied there’s we that conclusion. capital our we because Yeah, need a with compromise take final I the all very suggest, are can’t revenue customers on We can long-term we We these that to principles. to decisions and potential on at so hard I clarity won’t Day to have negotiating terms to our that Investor seriously. processes work compromise we’ll in Again, principles. right expand

said June. we be the on investor than happy we more early in meet that community see So, provide with more when when and color we’ll to that

Steve Hansen

Thanks. helpful. That’s

Operator

Hoexter ahead. Your Please from Lynch. of go Ken from America-Merrill Bank next question comes

Ken Hoexter

and Keith side and of with quarters. railroad? peak from the afternoon, in trouble noted has between vein, trend Good then, western in volumes? up versus you Great. cuts team. the you trouble need the The you the seeing type Can the for does that Are precision the and bonuses. last precision And head count railroading talk passed now the employee balance Have carriers hiring one the weather staff about two on of impacts this become this hiring signing any the some of economy? been

Keith Creel

we cuts Yes, decision every is, The the founding big focus underlying our It’s precision railroading make big quantum are over. what obviously and gains principle. on, productivity it’s number over.

We’re in the mode it’s controlled about as in now sustainable a we’ve growth talked growth. past. But

So, lead the upside, anticipation quarter given the to time employees. these qualify additional in was the it fourth did hiring takes we the

trained, some them and four they a and we’re of talking a growth producing second actually of the to to so is the selected, six-month hired, growth. start going now You’re second can We’ve obviously what revenue get that this to what’s fuel half window service. doing anticipated half

So, wouldn’t those all. I by be at misled numbers

going I revenue producing year than be better we’re growth. to over X%, probably in end and max the think that up, we’ll X% at

with to So, don’t additional efficiencies. do continue drive less ever not to think to we’re more and going that strive

Ken Hoexter

on would letter. I insight. STB your Great. be Follow-up appreciate that

issues, grow getting your from and bunch talk Can rails? noticed of due your that or the to to some improvement trouble seen performance other traffic about in with operational some of get carriers issues. business with the western empty a relations ability auto you have the you the and the crew You in especially

Keith Creel

an from perspective, rails revenue think improvements operational seen let John as all to as the seen have I that. the of far and material I’ll flow comment opportunity, have from interchange improvements and or the the I transfer I And cars. Yes,

John Brooks

I’d say Yes, definitely.

to in whether we few in customers and it dissimilar year unit And international numbers to fairly see our and into and have be need strategy unit, strong our So, together the the And, not space. been actually what on and back is our year, business business putting April to team a opportunities I yeah, to compounds late that that product lanes on. do sector next we want automotive the this towards focus some revenue automotive transform on stepping our weeks. we here that certainly new space, think really scenarios for

Keith Creel

sustainable Yes that’s upside on more growth where area see downside. definitely that an we much for we’re focused controlled than

Ken Hoexter

and John, the Keith, Great. time insight. appreciate

Operator

Your next from Research. Scott Wolfe comes question Group from

Your open. line is

Scott Group

Hey, thanks. Afternoon, guys.

a maybe about like quarter some you sounds the think headwind go rest some of of to the maybe price impacts about Or of as net for And ratio? is we mix it may number forward? John, the be of view that still year, any away, should negative it of in do operating opportunity first pricing some being how an mix turn that and mix on see was the mix So, accelerating As sort headwinds you price positive? think going temporary? that

John Brooks

expect seen that. offset help I units up. lower RTM as price less better few of that headwind lift I some to along it to now. certainly in weeks fully with as move April, little a starting it in I improvements we think initial I look some becomes certainly price right the momentum first into And business the QX, Again, at of of a actually QX. we’ve looks here think QX ongoing

additional growth a rail, have keep potash, we see being Now by it. RTMs. some on we’ll If – lot offset. we – in going said, help close opportunity of we a in strong certainly, price those that lower to crude growth also of But eye is certainly

Scott Group

Okay. That’s helpful.

on more one So crude.

perspective you’re could like maybe or or super there us just having you maybe at spreads spreads about be? that And why contracts color about, we talk come And do two So be of signed impact these do some And I has then can a or yet. any on the is give this four some on any years? of pricing you little compression, haven’t one talking of three the meaning great. discussions to in to duration sort recent know all? contracts Just you they would bit. and started – where want wide Where we got

John Brooks

the of of seeing the I dynamic of within that. terms issues a number of is In you’re a impacting sort producer spreads, industry that think

three are we’re the In shippers agreement. how typically on weeks discussing say seen with And the impact through and terms decisions or pricing Right now, the few terms those close that we’re any years. of we’ll see our I affecting in ultimately that we’ll rates, that. would haven’t But the work materialize. next I

Scott Group

what or be? At do need be? you need view, That’s your above? they very do where helpful. in level the And spreads Where to think to

John Brooks

seems we’re I’d right of now right. where at about Sort say

that the the least We’ll think saw, last they’re – level of at and believe that to And the at the be. right it is But $XX, $XX, going I at I we’re we’re see. $XX? at above Does where it talking sustain folks that are really producers we’re north terminals to I and to to likely itself expect be. $XX. down where now

Scott Group

Okay. Very guys. Thank you helpful.

Operator

Sachs. question next Reustle Goldman Matt comes from Your from

Your open. line is

Matt Reustle

Yes. taking my Thanks question. for

majority to back be Just reprice? the point year. you to XX% on to of you little is done, XX%, the to you’re you’ve us? of that When wanted go and bit assume say Can renewing book still fair it to have a you the repricing that that majority frame still quarter XX% this for in is that basically done a

John Brooks

Yes.

So of no, second the year. half take bulk typically the of the place renewals the

then. of probably renewals disproportionate will got a amount those that – take you we’ve place So

to all at that’s the needs think be excluding it’s our specifically look the tariff again, second year. as that are number there, the I excluding grains. and of of XX% our contracts. about out contracts That’s half probably pricing yet you renewed. it’s And it, If that And that

contracts. of That So include that certainly That include wouldn’t tax. our bigger wouldn’t and some include wouldn’t shippers Canpotex.

Keith Creel

Anything locked long-term up in deals, not inclusive. that’s

exclude to big modeling your you’ve to got So be chunks. careful with those

Matt Reustle

then what on Sure, percentage Is a that volumes long-term XX,XXX it entirely you’re a have sure, more? on to is contracts? today, tied Or that spot And Thank carrying are any still? type on year crude. you. or that’s the of – contract okay. long-term one Of more crude already just of percentage carloads of those

John Brooks

And are of couple a on part A of small rest – a max I’d on the annual. very contracts. those two three-year that year, say year, small is of

Matt Reustle

Thank you.

Operator

Quettawala Your comes Banking]. [‎Scotiabank Turan next Global from question

line Your is open.

Turan Quettawala

Yes, my QX. wondering just first little here trend RTMs in you guess could talk John. for question. how good you you bit about for I was afternoon. expect one Thank if taking a I to

going weather. get fairly But presumably, difficult here You is have year. as last we lap, better a I guess, fairly to be strong grain from

Thank So would helpful. there color just you. some be

John Brooks

I digits. would expect mid-single

I right saw that think – we're right there sitting area in now. we're I

Turan Quettawala

thank Okay, that's you. helpful,

course John? So it here should even the the year, I think of be through fairly

John Brooks

know handle what And are that's us. towards half we're know there there's for the makes it, to to. year and that guiding back take you what, upside the to resources we're of hopeful. business going sense what, we're You If the on opportunity

Turan Quettawala

just ask a Thank And quick guess you. I I for could if clarification Nadeem.

try a wanted from to Just change much semantics was operating impact in fuel in items terms two ratio in what to a fundamental for just see of bit there wondering, the QX? Would I and more impact than But think how mentioned QX. as – was you negative the to little there number OR. Nadeem, sort be in a you anything I those FX, else. give to know able it's

Nadeem Velani

basis about basis was points about FX and points. was XX fuel XX Yes.

Turan Quettawala

much. very I fuel Is impact an that… think going said And to you forward. wasn't you be going Thank

Nadeem Velani

kind – spot say No, drag. big it as be fuel. it an now, I I it mean, as depends of not But we will right impact. it see shouldn't a predicting would on rates, still be

Turan Quettawala

thank Okay, you. helpful. That’s

Operator

next question Your comes from JPMorgan. from Ossenbeck Brian

Your line is open.

Brian Ossenbeck

questions. thanks Hey, taking for my

all? the on to that it we're with If So can rail-owned a that percentage the does network difficulty versus factor? does that. seeing And your reposition on ability that's what's peak. mean, margin? if like small don't – like online in have do the come with operations So the on how But back – perhaps same any your more that private is to record even it's come affect I things you of the then to backhauls, volume sand. first one moving mix. And equipment, that was does bit that? you a or operational if sort at also, then driving just confirm not And equipment private cars more of assuming I'm XXXX cars going

John Brooks

our Generally cars. big, markets. efficient, look But opportunities in in long in certainly those I cars, potash seeing trains. in Well, growth growth private high-margin us. crude, we're our that's if you think at private pretty All typically more frac growth frankly, move for sand,

yes, differently, So unit may backhauls trains terms no of would really and the in But that there utilizing say of cars, from perspective, direct equipment of impact. an terms maybe as operations with in those be there's many the I opportunities. operation not

Brian Ossenbeck

Thank rails. both you. month Canadian a Okay. is ago And just – one on then There was grain other a political the about the environment. and hearing just

update then give see Bill So wanted any I you there's And you. just can CXX? follow-through latest from Thank to the on if us that?

Keith Creel

working on our say with the where grain I are. no, priorities shippers, obviously, front, Well, would directly their we're

lot Canadian of side. and to allows that. you had changes that conditions. a shippers us grain into numbers out really do, we February as mentioned, action take good now grain Obviously, Bay our soon into sure the some year-to-date. But for car our they to some on position open and what, CXX, fleet. We're sign Thunder season know on on and as I'm government well not bill. And tougher as Vancouver, ran our big that anxiously into a finalize waiting operating the grain we've QX had So January sold look Keith for with

Brian Ossenbeck

Any specifics just kind it? announce timing? of they there when on Or

Keith Creel

capacity for to our away to we for the We we the the reliability the and the guesswork. compelling it come that getting that as it product would that's some more the grain but is have it's that's point, out. John's more be, legislation March. marketplace. and have there to invest think the investment, taking can to will more the the terms capacity deliver for built ports supply get shippers increase Ottawa. been been reliable reliable have think the fleet. when hoped and fleet export. to sooner money said, that's But government certainly, answered the can made, assuming set a grain that chain The better would by But aside It I can entire But the benefits supply educate for that Yes, question Certainly, of for with not the off will by Pacific to that then are be does, terms renewed longer those much where we all a on politics, Canadian going the supply that's much have the decision cars that longer we only support to that be. better shippers amendments productive, slipping in doing will the we chain to to right the on we're chain a

Brian Ossenbeck

appreciate it. for thanks Okay, time. I

Operator

next Stanley. Ravi comes from from Your Morgan go Shanker question ahead. Please

Ravi Shanker

more Mountain crude again. Thanks. does on rail A on making that question for way The about this any delay attractive Trans by and quick potential cancellation, opportunity, you potentially you? the it impact think have

John Brooks

No, again, are that the it no working it I working shippers individually, interested really in had really us. impact. has with crude we're with mean, doesn't. And

Keith Creel

business a railroad We're And matter do fruition. of But a built. there lines to will so view that that has railway. term, a market It's that long not no piece diversification from impression under standpoint if. the where the oil of with niche from will partner a It's will. to that not and pipelines speak, standpoint that don't come ultimately is going quality the replace be the a the optionality companies railway when not top level false just They think the I really to we're will will left, some know. the we be and

Nadeem Velani

from than point We're more as you investors off better as a point a of can railroad. of and these We're And off confidence of the they us for there's view, economy aren't. view for to Canada some built. be better upside from of argue company an pipelines

Ravi Shanker

targets, Are of you it years? also, more but at the event? like we out investor the looks in we Or upcoming not of and laying help can here, five is us table you terms from CP expect And it. what Got the set of long-term blocking in kind your to of steal just at can thunder in term? kind near what your looking tackling for just

Keith Creel

Well, near can bit to be five. at view. is We'd be going three-year to we of us, term have guessing a any have that anything reliability

what some It's led get indicators three best what to you should encouraging. the what the for on So I indicate And years. can we're tell come to, us being expect. estimates, you color you expect our and to can next

Nadeem Velani

our interaction, have Investor it how good And I to many that is with to you new key a the had a think the kind our opportunity of see not will of a of of Day, long-term meet just and team targets think, be some interact with component I aligning plan. chance to

it'll on a I to of you'll less continued railroading, think guys you'll think good focus pull on I trying back see precision that. think be of days. you although But a into heck of focus – see keep crude, lot couple us I

Ravi Shanker

old pretty in We're school way the think. we

hope some to see So the very of guys. much, as Thanks well. there future

Operator

question comes Please from from go Securities. Poirier next Your Benoit Desjardins ahead.

Benoit Poirier

gentlemen. question afternoon, My CapEx. Good the on first is

beyond more end and comes and strong, your that employees? that should from OR guidance remains maintained how government CapEx You and potentially the the on bringing thinking about even fundamental going impact the decision. of the we for be business And of that also on training XXXX you're XXXX the top locomotives the will year. range the But depend given new obviously, one

Keith Creel

in each as other. we've uncertainty locomotives, far against relative aside you for some points, Benoit. as us a tells There's mean, CapEx the the So the we're in investment, high hopper that that forward money hedge itself, of set spite some that the are natural to and bringing some capital envelope the those I of risk additional which hit

capital plan to our don't anything we expanding So do envelope.

Nadeem Velani

I terms closer be of on where think capital we end cars investment. said, probably I can the is where to light be Yes, we'll hope the we as if or decision we mean, to green that hopper the Keith the upper get make in

– I come that currency see investment. But is to we'll we're that It's some That's about they it. U.S. going with based, commitments, the goes, require of have some what John's contracts of mean, and to some tied some some too. potentially to the a whether capital these dollar fruition, of point drive to volatility. how capital Canadian had long-term dollar. of occurs lot Somewhat

still things moving lot range. the today Where So allocate of we has of is mix a that are some see of changed you there the within capital. maybe parts. But how

Benoit Poirier

And is And if the on your second by do the I'm Okay, were significant sign rail. have today, to my by crude? to just that some the when start okay, pretty you crude crude locomotives are question committed you wondering, already could deal you moving good. rail? that's

John Brooks

the resources based of would take year. place up this ramp we'll second again, to of what half on responsibly So the to us. are the available it expect sort I

work. able the we be to And business are that in got We're there allocated we our make not need that lot service we're new a on if, years those see fact, protect business. reallocate current We There's from increase volumes you'll mindful to of the these going resources resources be So our to of. now. to service agreements to will today shippers. customers existing XX to and

So important that's factor. an

Benoit Poirier

(XX:XX.X) to given Okay. And maybe just go the Coast? ability direct Gulf you (inaudible) of your to don't partners the

Maeghan Albiston

repeat Sorry, Could Benoit, there. you broke up you that question?

Benoit Poirier

Yes, sure.

to your was crude Given you don't handle by from about the go direct partners I ability Coast, to rail. wondering willingness Gulf the and the

Keith Creel

Yes.

there's on willingness with those all of potential them. our and working with U.S. we're opportunities, carriers So all

Benoit Poirier

you for much Okay. very Thank time. the

Operator

question of comes with Bank. Your next line the Clarke Deutsche Seldon from

Your line is open.

Seldon Clarke

coal guys, some see to helpful Hey improvements talk Any of just thoughts thanks Is in of coal an the minute? the about there profit question. Can as terms some your coal for expire? a would the business there pricing outlook franchise. you be for opportunity of contracts major for

John Brooks

agreements. pending renewals really near-term don't on have We those any

those of to around efficiency lot come available. be the a opportunities and as operating they So work continues capturing

Seldon Clarke

Okay.

follow-up Just a to that.

kind help cost of how If business also trended years, of just has of over would be me coal the couple that can you profile helpful. the last understand your

John Brooks

some work than and other coal can to But of of we profile in what looking speak is increase I those do the opportunities, sure train case those doing lengths with can coal I exact connecting partners, more not the efficiency to more the would our – to our we're and to say make network. things efficiently. thermal our cost I'm need where that, we

Seldon Clarke

throughout as just some we anything delayed good off into that helpful. temporary came March as quickly go about right, the might understand. temporary, into headcount headcount. that’s like then roll kind we this to growth And that think sequential XQ? like or on move Was hires the in on – is there I maybe All Or of retirement base year?

Keith Creel

of So – the on seen there's as shift to have March some no headcount But – guess. – a ramp there's that lot engineering of in capital parts. I part I up or side anomalies, our would is we moving And you work work. capital nothing

X% a to through I range, year, think plan, standpoint, to demonstrate year-over-year would the our growth absorbing headcount, from I in going X% some efficiencies. in efficiencies which is modeling of

to So that's place be. probably a good

Seldon Clarke

For the full year XXXX?

Keith Creel

correct, yes. That's

Operator

question Justin from Long Stephens. Your with next comes

open. is line Your

Justin Long

afternoon. good and question the taking for Thanks

back commentary few January. you from didn't maybe the So outlook question, it worse do than thinking a some you the broader opportunity you what theXXXX of ago? did months down you better but feel growth as in EPS a at And helpful change, relative on that would up answer to be the or to about were or understand level, high arrows

Nadeem Velani

we say mentioned, environment, much demand is stronger. as the we that say would I feel certainly, certainly I'd better.

operating the of difficult economic is a frankly. The commodity, and environment, stronger and by the on just stronger environment team a than way more that's way quite is weather It's and not business. more stronger the offset team by lot just kind despite demand, pricing bringing outlook is commodity So the robust.

I go thought continue on, lower comp I headwind because on is to I Justin. we could be stock-based Our be would and it than mean, undervalued.

Justin Long

I if that's an was uplift that you revenue very could wondering question, And expecting of from you're incremental an or XXXX? much update customer in the Okay, provide second K+ helpful. on And S business. how volume John

John Brooks

car month for volumes week I'd month. running week, the off increased, have year, metric X.X XXX million Well, steadily modeled we've full We The trains. by by tons. say started

with moving summer. right to get XXX ultimate to this we're the by a now objective think XXX I to believe, I

on sort sort the business as that of at outlook And now. X.X full So is remains coming of we expected year number.

Justin Long

the Okay, time. great. I appreciate

Operator

back at this the turn call further no are presenters. questions to time. over will the now I There

Keith Creel

wrap we'll up. Okay, it

optimistic. the as railroading and the time, of profitable, front. land a behind numbers the discipline scheduled our some tremendous we fueled us. the But and with in matching which with we choppiness by evidenced sustainable around We've a view that growth. make a remain in We marketplace. model, there's demand is that We've got the precision sure we'll belief in as of think maintain in we're of got good I to in choppiness demonstrated, front disciplined that's amount true labor little confidence At us uncertainty Q&A with the remain place. the a bit a same has again,

June partners in the very view, and long-term through fourth short-term We'll quarter, third that strength We from encouraging pain of quarter we'll from and which Calgary in showcasing health economic June forward of point our in investors, very encouraging our to look a these view, sustainability see, to I of we CP a a a have business have the in view, We business go from a go second and shareholder is not, choppy waters. and solid long-term for a think, point XXXX. and from seeing analysts view quarter. or and through our opportunity

that safe welcoming We to Calgary. those corporate campus you to are of travels, forward our So you look coming. headquarters in

We you soon. will see

Operator

today’s concludes This call. conference

You may now disconnect.